It may happen that if your clients are physical people and not companies, that you’re giving away coupons at some point. How should you treat them however?

In essence what a coupon is, it’s a promise that in future, against this coupon you will give away something either for free or with a cheaper price. So in your accounting if it’s anything, it’s an expense. 

However, initially, when first giving the coupon either in a newspaper or a magazine or some other place, you don’t account for anything. You wont take on a liability as a promise to give something or an expense. The first and only accounting entry when dealing with coupons comes when one is presented to you.

Say that a client is making a purchase by you; he is buying something worth of 100 and your coupon says that when buying something worth of at least 50, they will get a discount of 20%. Your accounting entry is as follows:

Cr Sales revenue 80 (initial price of 100 with 20% discount is 80)

Db Account receivables 80

Your sales revenue could be a 100, however, since you gave away a coupon with a promise to give 20% discount, your sales revenue is less than a 100, it’s 20% less.